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CBO warning for years that Obamacare creates disincentive to work

CBO warning for years that Obamacare creates disincentive to work

Elmendorf testimony in February 2011 almost identical to testimony today, only the total numbers now are worse.

Yesterday we covered the CBO Report on loss of labor provided by workers as a result of Obamacare subsidies,  CBO confirms Obamacare subsidies create disincentive to work harder.

It’s all about how the implicit marginal tax rate — taxes plus loss of benefits — creates a disincentive to work hard because for each dollar you earn, you lose a huge percentage, sometimes more than 100%, of that earned dollar through higher taxes and loss of government benefits.

It is economically rational, in this circumstance, not to work harder.  It has nothing to do with laziness, but with government creating an incentive not to work.

Here’s the testimony today from Doug Elmendorf, head of the Congressional Budget Office, via National Review:

“By providing heavily subsidized health insurance to people with very low income, and then withdrawing those subsidies as income rises, the act creates a disincentive for people to work relative to what would have been the case in the absence of that act,” Douglas Elmendorf told the House Budget Committee on Wednesday. “By providing a subsidy, these people are better off, but they do have less of an incentive to work.”

None of this is new. Here’s Elmendorf’s testimony from February 2011 regarding the same effect, although at that time the projection was only 800,000 jobs:


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So, tell me, Mr. CBO man, what changed in the ACA from 2009 when you issued rosey reports to Congress prior to the vote, to 2011, when you had less rosey projections, to 2014??

The answer?

All the waivers and delays of mandates that should–SHOULD– have made your numbers even rosier than your first projections.

No, Mr. CBO man–you can stick your numbers in the same place Obama can stick his pen…and his phone.

Not to work. Not to procreate. A dysfunctional convergence seems inevitable. Just do what feels good, I guess. We can always “invite” aliens to do what Americans would rather not do.

    JOHN B in reply to n.n. | February 6, 2014 at 10:25 pm

    The Dems (and NPR) quickly labeled the disincentive to work as giving people a “choice”.

    Some of choose to work and support ourselves. Some choose not to work and get supported by ourselves. Obamas’ poll numbers are still pretty high with the second choice group.

The Single Most Important Fact in the CBO Analysis:

Ten years from implementation – the total number insured will equal the pre-implemtation levels.

10 years and 1.5 Trillion dollars and not one extra insured American.

Obamacare is a welfare trap: low income workers get free healthcare, but middle income workers pay full price for healthcare (expensive) and are forced by the government to do so.

The marginal worker near the income threshold is better off not working (taking vacation days off) than working harder and getting thrown into Obamacare taxation.

Still the problem is less that Obamacare is an income based entitlement triggering at a certain income, and more to do with the fact that every welfare or benefits program is an income based entitlement triggering at about the same income threshold: Foodstamps, Section 8, Obamaphone, Energy credits, child care credits, Social security, Earned income tax credits, traditional welfare…. All basically the same structure. Plus at the same income levels that poor working people lose their benefits, higher income taxes start to phase in.

This combination of safety net phaseouts and tax hikes at the same income level have resulted in a situation where the Pennsylvania Secretary of state showed that a single mother with 2 kids earning $28k takes home more pay than she would earning $72k. (The numbers predate Obamacare and are more harsh today).

In other words, get to $28k and stop working in Pennsylvania. Or report $28k of income but no more.

That’s how the war on the middle class works.

There are good incentives to work a little bit, but no incentives for people to work harder to improve their lives. Work harder than a minimum, get crushed.

And how are people supposed to ever earn themselves out of poverty, if additional effort gets penalized so harshly.

And let’s face it, the real reason that men work hard at improving their life is to attract women and provide for their kids. The government has created a situation where work doesn’t pay off. Not anymore. Not in America,

    Lady Penguin in reply to rotten. | February 5, 2014 at 3:50 pm

    Only one quibble with your discussion of the welfare entitlement entities. I agree on all of the programs you’ve mentioned except the inclusion of Social Security. Along with Medicare, IMO, those are exceptions. Working people have been paying into those programs their entire working lives, essentially they’ve paid into a “retirement pension” system (SS) and paid premiums into a health insurance program (Medicare). I’m not saying they’re sustainable, or that they’re not a ponzi pyramid which won’t collapse, but Americans have been paying those monies into the government; retirement is the only time they’re going to draw anything from them. (I know there is Social Security Disability and early retirement, but the majority are still on the standard path.

    bvw in reply to rotten. | February 5, 2014 at 4:37 pm

    I saw that report, I think via Zero Hedge. Here’s a link to it at AEI. See the chart with the “Highest Welfare Cliff” call out. The numbers there are “The single mom is better off earning$29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income & benefits of $57,045.”

Obama is teaching the “folks” everything he knows about work and community life.

Progressives do not create wealth. They create “social parasitism.”

Obamacare seems to be causing the return of pay-out-of-your-own-pocket services, which is not a bad thing. The law allows a religious association exemption — that may protect providers who are religiously affiliated from the great murrain that is a’coming for many hospitals and practices. Thus the poor who are religious will be advantaged over the poor who are of the government faith. The poor of government faith will receive third world care, worse than they get now.

Human ingenuity loves to jump over the challenges. Look for medical procedure vacations abroad — India, Central America — to increase.

Still, this thing is a killing beast. Many are being and will be hurt by lack of care, by substandard care, by financial distress — which has a strong negative impact on health. It has a genocidal aspect — the killing off of the older generation at higher rates. The killing off of the newly poor — those families not entrained in the welfare or pensioner classes.